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TMI Blog2020 (5) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... tem No. 43 to 57 of Annexure-III, the Council had no objection and approved the recommendation or Fitment Committee. The Hon ble Minister from Uttar Pradesh raised the issue about item at Si. No. 58 of Annexure III i.e. Extra Neutral Alcohol (ENA). The above decision of the GST Council also supports the classification ruled by the Lower Authority - there are no reason to interfere with the Order of the Advance Ruling Authority in this matter. Appeal dismissed. - TN/AAAR/01/2020(AR), A.R.Appeal No. 9/2019/AAAR - - - Dated:- 10-2-2020 - MS. SUNGITA SHARMA, MEMBER AND THIRU. M. A. SIDDIQUE, MEMBER Preamble 1. In terms of Section 102 of the Central Goods Services Tax Act 2017/Tamilnadu Goods Services Tax Act 2017( the Act , in Short), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the Order. Provided that no rectification which has the effect of enhancing the tax l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for preservation purpose. Fruit pulps are in semi liquid form and fruit juice are in liquid form without any addition of sugar or other additives. There is no difference in the usage of fruit pulp or fruit juices used for manufacture of carbonated fruit juices. They submitted copy of Hon ble Supreme court judgment in classification of APPY FIZZ in case of M/s. Parle Agro Ltd Vs. Commissioner of Commercial Taxes = 2017 (5) TMI 592 - SUPREME COURT , Trivandrum in the VAT regime where the Hon ble Supreme court ruled on the classification as per Kerala VAT notifications. They stated that fruit pulp or fruit juice based drinks should be classified under HSN 22029920 relying on the FSSAI regulations. They have claimed that Appy Fizz drink is being sold at 12% GST and the same should be permitted for their drinks. 3. The Original Authorities has ruled as follows: The products Richyaa Darner Lemon and Licta Lemon to be supplied by the applicant are classifiable under CTH 22021020 and all others i.e. Richyaa Darner Cola , Licta Cola , Richyaa Darner Jeera Soda , Licta Jeera Masala , Richyaa Darner Orange and Licta Orange are classifiable as Other under CTH 22021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore would be classified under Tariff item No. 2202 90 20 as fruit juice based drinks. Even otherwise, the products in question are classifiable under Tariff Item 2202 9920 as Fruit Juice Based Drinks o The products in question is undisputedly covered under Chapter Heading No. 2202, which deals with non-alcoholic beverages, other than fruit or vegetable juices, classified under the Chapter Heading No. 2009, which has been accepted in the impugned Ruling as well o Chapter Heading No. 2202 has been divided into two sub-headings, viz. Sub-heading 2202 10 which covers Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured and sub-heading 2202 99 which covers other non-alcoholic beverages . Fruit pulp or fruit juice based drinks are specifically covered under Tariff Item No. 2202 99 20 under the Sub-heading No. 2202 99 as Other non-alcoholic beverages o The organisation and scheme of Customs Chapter Heading No. 2202 demonstrates that tariff sub-heading No. 2202 10 covers drinks which are predominantly made up of water, including mineral water and aerated water and are either sweetened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent that it attributes the essential character to the beverage, not merely as a flavouring agent. It is the dominant nature of the product which determines the classification under the Sub-heading No. 2202 10 or 220299. o As per FSSAI, flavouring agents can be natural, nature-identical or synthetic substances. Fruit juice or essence can be said to be a natural flavouring agent. In that sense, any beverage made of fruit juice flavor would be a flavoured water and would be liable for classification under Sub-heading No. 2202.10 However, a closer examination of the scheme of classification under Chapter Heading No. 2202 would reveal that such an interpretation is not what is contemplated in Chapter Heading 2202 and that flavoured water is not the same as a fruit juice-based drink. o If tariff item 2202 10 90 is treated to include an orange juice based drink, it would mean that any fruit juice based drink would be susceptible to classification under Tariff Item No. 2202 10 90, as being flavoured water, irrespective of the composition, nature and common understanding of the market regarding the nature of the product. However, this is evidently not the intention of the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the Tariff for fruit pulp/ fruit juice based drinks . Therefore the products in question clearly satisfies the description of this entry and is accordingly, classifiable under tariff item 2202 90 20, by virtue of Rule 3(a) of GIR. o Assuming both the headings pertaining to Lemonade and the fruit pulp/ fruit juice based drinks are equally specific on account of presence of the lime juice concentrate therein, the product would be classifiable under 2202 90 20 by virtue of Rule 3(b) of GIR As per the Common Parlance Test, the products in Question are classifiable under Tariff Item 22029920 - o understanding of the product in common parlance could be gauged from the way the product in question is marketed. Reliance is based on the decision of Honble Supreme Court in the case of CCE Vs. Connaught Plaza Restaurant (P) Ltd. = 2012 (12) TMI 149 - SUPREME COURT and CCE Vs. Wockhardt Life Sciences Ltd. = 2012 (3) TMI 40 - SUPREME COURT o In case of Licta Cola and other products, the label reads as Contain Fruits . Thus the intent of the appellant in labelling the product in this manner depicts the fact that the product is marketed as fruit juice b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2202 10 90. HSN Explanatory Notes of CTH 2202 also supports the said contention. Further, the said view is also affirmed by the Hon ble Tribunal Larger Bench in the case of Brindavan Beverages Pvt. Ltd. [2019 (10) TMI 762] . Beverage vs. Water o In order to further substantiate their claim that the impugned products do not qualify as waters , reference is made to the FSSAI Regulations which lays down the standards for various articles of food. Regulation 2.3.30 deals with Carbonated Fruit Beverages or Fruit Drinks . Further, Regulation 2.10.6 deals with Carbonated Water . It is apparent from the FSSAI regulations that a Carbonated Beverage is distinct from Carbonated Water . As stated in the Grounds of Appeal, the impugned products manufactured by the Appellant qualifies as a carbonated beverage with fruit juice as it is squarely covered by Para 3A of Regulation 2.3.30. o Once the impugned products qualify as a carbonated beverage with fruit juice, it cannot also qualify as a carbonated water under Regulation 2.10.6. In this regard, it is submitted that the Hon ble Authority for Advance Ruling has acknowledged the fact Viz., the impugned product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t juices, they will be classifiable as fruit juice based drinks under CTH 2202 99 20. Merely because the impugned products do not qualify as Fruit Juices of CTH 2009, the same does not debar classification under CTH 2202 99 20 as Fruit juice based drinks . o The Hon ble Authority for Advance Ruling examined the scope of CTH 2009 which encompasses Fruit Juices and arrived at the conclusion that the impugned products will not fall within the scope of the Heading. o Reliance was placed on the FSSAI Regulations wherein Fruit Juices have been defined to mean unfermented but fermentable product obtained by a mechanical process from sound, ripe fruit or the flesh thereof and processed by heat, in an appropriate manner, before or after being sealed in a container, so as to prevent spoilage and are intended for direct consumption. o The Hon ble Authority for Advance Ruling observed that the impugned products are prepared by adding fruit juices to large quantities of carbonated water and that the fruit juices are not intended for direct consumption but are only used as an ingredient during Preparation of the drinks. Therefore, it was concluded that the impugned pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts (P) Ltd. [2003 (158) ELT 257 (SC)] = 2003 (11) TMI 69 - SUPREME COURT wherein it was held that the content of the product is not a determinative factor in the case of classification o The theory of trade parlance has been widely accepted as a sound test in the context of classification time and again by the Apex Court and Hon ble High Courts. Consequently, to qualify as a fruit juice based drink, so long as the essential character of a drink is imparted by the fruit juice component, then such drink will be treated as a fruit juice based drink. o In the instant case, the essential character for the carbonated beverages is imparted by the lime/orange juice content contained in it. This is evidenced by the fact that in trade parlance, the consumers purchase the said beverages for the fruit juice content contained in it and not for the carbonated water. Therefore, the impugned products are rightly classifiable as fruit juice based drinks under CTI-I 2202 99 20. E. Fitment o They have commenced manufacturing of the impugned products only from 27th November 2017 onwards. Prior to the said date, they were engaged in manufacturing of carbonated beverages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, applicable chapter notes of the Customs Tariff and the HSN Explanatory notes, had held that the products Richyaa Darner Lemon and Licta Lemon are classifiable under CTH 22021020 ; and Richyaa Darner Cola , Licta Cola , Richyaa Darner Jeera Soda , Licta Jeera Masala , Richyaa Darner Orange and Licta Orange are classifiable as Other under CTH 22021090. We find that the Lower Authority while answering as above has (1) Considered the FSSAI Regulations 2.3.6-Thermally Processed Fruit Juices; 2.3.30- Carbonated Fruit Beverages or Fruit Drinks and 14.1.2.1-Fruit juices 14.1.4.1-Carbonated water-based flavoured drinks of Appendix A to these Regulations where there is a food Category system and concluded that fruit juices and carbonated beverages with fruit juice are distinct products under these regulations and that the appellants products are covered under Para 3A of 2.3.30 of the Regulations and Category 14.1.4.1 in the food category system in Appendix A to these regulations as Carbonated Beverages with fruit juice . (2) Considered the entries of the Customs Tariff Heading 2009 related to Fruit Juice and the HSN Explanatory notes and as in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Tariff to substantiate their claim. The contentions are discussed as under. 8. Before proceeding further, the CTH 2202, the relevant HSN Explanatory notes are examined as under: CTH 2202: 2202 WATERS, INCLUDING MINERAL WATERS AND AERATED WATERS, CONTAINING ADDED SUGAR OR OTHER SWEETENING MATTER OR FLAVOURED, AND OTHER NON-ALCOHOLIC BEVERAGES, NOT INCLUDING FRUIT OR VEGETABLE JUICES OF HEADING 2009 220210 - Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured : 22021010 --- Aerated waters 22021020 --- Lemonade 22021090 --- Other - Other: 22029100 -- Non alcoholic beer 220299 -- Other : 22029910 --- Soya milk drinks, whether or not sweetended or flavou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voured with fruit juices, often aerated with Carbon dioxide and generally presented in bottles or other airtight containers. As per Notes B above, CTH 220299 covers - other non-alcoholic beverages, not including Fruit or Vegetable juice under 2009 and ready for consumption The Customs Tariff under single dash(-)CTH 2202 10 includes Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured and under the said (-), the following are covered: CTH 2202 10 10(with a (---)) covers Aerated waters; CTH 2202 10 20(with a (---)) covers Lemonade; CTH 2202 10 90(with a (---)) covers others The above heading as per the Explanatory notes covers Beverages that are often aerated with carbon dioxide gas and are generally presented in bottles or other airtight containers. The Customs tariff under single dash (-) CTH 220299 includes Other non-alcoholic beverages, not including fruit or vegetable juices of heading 2009 and under the said single dash (-), the following are covered: CTH 2202 9910(with a (---)) covers Soya milk drinks, whether or not Sweetened or flavoured ; CTH 2202 99 20(with a (---))cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not less than 5.0 percent (b) Other fruits Not less than 10.0 percent 3. The product shall have the colour, taste flavor characteristic of the product shall be free from extraneous matter. 3A. In case the quantity of fruit juice is below 10.0 per cent. but not less than 5.0 per Cent. (2.5 per cent. in case of lime or lemon), the product shall be called carbonated Beverages with fruit juice and in such cases the requirement of TSS (Total Soluble Solids) shall not apply and the quantity of fruit juice shall be declared on the label. Thus carbonated Fruit Beverage or Fruit Drink is prepared from fruit juice and water or carbonated water and the minimum requirement of the Fruit content is not less than 5.0 percent in the case of Lime or Lemon juice and in cases of other fruits the content should not be less than 10.0 percent. In case if the quantity of fruit juice(other than lime or lemon) is less than 10.0 percent but not less than 5.0 percent and in case of lime or lemon the same is less than 5.0 percent but not less than 2.5 percent, then the products are called as Carbonated Beverages with Fruit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Carbonated and Non-Carbonated waters containing flavours are found in category 14.1.4 Carbonated waters containing flavours are categorized under 14.1.4.1 as Carbonated water-based flavoured drinks Beverages based on fruit and Vegetable juices are found in food category 14.1.4.2, which covers Von-Carbonated water-based flavoured drinks, including Punches and Ades 8.3 The appellant has stated that when it is concluded by the Lower authority that the products are not covered as Carbonated Water under Regulation 2.10.6 [Beverages Non Alcoholic-Carbonated], the same do not fall under the food category at 14.1.4.1. From the categorisation of the Food products above, the Carbonated water is categorised under 14.1.1, while the Carbonated Waters containing flavours are categorised under 14.1.4.1. The Regulation 2.3.30 specifies the requirement of fruit juice content in the Beverages to be termed as either Carbonated Fruit Beverages or Fruit Drinks or Carbonated Beverages with Fruit Juice , while the food category under Appendix A provides the categorisation of water-based flavoured drinks based on Carbonated or Non-Carbonated . In the case at hand, it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case at hand the content of lime juice/orange juice is 2.5%/5.0% only and therefore the cited decision is not applicable to the case at hand. 9. The appellant has placed reliance on the decision of the Ld. Commissioner Appeals, Hyderabad in the case Trinity Beverages Pvt Ltd.[42/ 19-20 dated 30.09.2019] and have claimed that their competitors in the Industry who are manufacturing similar carbonated beverages are classifying their products under CTH 22029920 as fruit juice based drinks. It is seen that in the said case, the Fruit juice content in the Beverages is around 7% and the Commissioner(Appeal) following the CESTAT Larger Bench decision in the Case of Brindavan Beverages cited above has held that they are fruit-based and accordingly classified under CTH 22029920. The facts are not similar in as much as the percentage of fruit content in the products at hand are 5% or less and as per the cited Larger Bench decision, the same are not fruit juice based drinks. 10. The applicant has stated that the impugned products are being manufactured by them from 27th November 2017 and before that they were using artificial flavouring which did not contain any fruit juice and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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